Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Marcus Grubb, managing director of investment at the World Gold Council said: “The current worldwide macro-economic scenario of competing inflationary and deflationary forces combined with sovereign debt contagion in Europe and the federal debt ceiling impasse in the United States continues to be a positive one for gold.

“In Europe, sovereign debt contagion is once again being priced into bond markets with Italian and Spanish spreads over Bunds rising to multi-year highs. In the US, weak labour and housing markets, high energy costs and the prospect of weak growth are adding to market uncertainty.”

But Patrick Connolly of independent financial advisers AWD Chase de Vere claimed there are disturbing lessons from history for investors tempted to join the bandwagon now. He said: “Between July 20, 1976, and January 21, 1980, the price of gold rose by a staggering 688pc, an annualised return of about 80pc, this rise being due to strong oil prices, high levels of inflation and geopolitical issues. This compares with a return of about 17pc per annum for the current bull run.

“However, from its peak in 1980 the price of gold fell by 65pc in less than 2½ years and it took more than 28 years for the 1980 peak to be reached again and investors to get their money back, not even taking into account the effects of inflation. So much for gold being a reliable hedge against inflation

“While it is very easy to be positive about an asset class that has already performed strongly, it would be a mistake to think that any investment will keep going up indefinitely and when the price of gold does fall it could be far and fast.

“It is possible that we are now in a ‘gold bubble’ and those investing face the risk of losing far more on the downside than they could potentially gain on the upside.”

Against all that, Adrian Ash of BullionVault.com said: “You typically need to buy insurance before disaster strikes, but gold has just kept on paying, right since Bear Stearns’ subprime hedge funds first blew up four years ago this week.

“People first began talking about a bubble when quantative easing began and the US stock market hit a 12-year low at the start of 2009. The gold price has doubled since then for dollar, euro and sterling investors.

“Early buyers simply saw what’s now plain to everyone – that a debt bubble was building, and a debt bubble so large that the only policy solution is either default or devalue.

“Creditors are sure to get stuffed either way. They always pay in the end, not the debtors. A growing handful of savers and retirees are choosing to opt out by investing in physical gold, which is rare, tightly supplied and indestructible.”